Federalism

This was originally written for my AP US Government class.

The centralized federalism towards which the nation was leaning
during the Great Society is the best approach for the future of our
country. The conceptions of federalism that give more power to the
states were born during an era when the states were seen as nearly
independent countries. This view of the United States changed after
the Civil War, when the correct grammar changed from “the United
States are” to “the United States is.” The concepts
of federalism come mainly from the compromises needed in the
Constitution to convince the states to give up the greater powers they
had at that time.

One of the problems of federalism in a modern era, where people
can move easily from state to state, is that the states compete
with each other in an unproductive manner. They try to offer the
fewest benefits to their citizens to avoid attracting citizens
from other states who would receive those benefits. This is
happening under the new welfare law, the Temporary Assistance to
Needy Families Act (TANF), in which states receive block grants
to provide welfare benefits with considerable freedom as to who
receives the money and how much. States also compete
inefficiently by trying to attract companies by offering special
tax relief to companies that hire large numbers of workers in
their state. This also promotes inefficiency, because the most
efficient decision for the economy as a whole would be made
without interference from varying taxation. A recent example is
a southern state (Alabama or Tennessee?) offering considerable
tax breaks to a car manufacturer who would locate a plant in that
state. If the states did not try to compete with each other in
this manner, industry and population would be distributed in a
more economically efficient manner.

Another huge problem with federalism is the wasteful duplication
of government administration. Conservatives always crying out
for the reduction in the size of government, yet the replication
of the same administration in fifty states is certainly not a
good example of efficiency. The new welfare law (TANF) forces
each of the fifty states to administer a program that was once
largely administered by the federal government. They must also
make decisions on policies, down to the smallest details. This
requires considerable expenditure that would not be needed if the
program were run by the federal government. Many other programs
currently run by the states or by local governments would have
their costs significantly reduced if many of their policies were
coordinated the federal level rather than run as independent
units that have to make each decision on their own.

Another problem with the federal system is that the use of states as
taxing and spending units hampers the redistribution of income and often sends money
to the wrong places. The idea of general revenue sharing that was used
during the 1970s and 1980s should be significantly extended to find all
programs in which states do roughly the same thing. (The more sensible
thing to do with these programs would be to fund and run them from the
federal level.) State and local taxes could be eliminated almost
entirely, which would simplify people's lives (they could be a more
simple type of tax if they were very small) and would allow for the
more progressive federal tax system to have its full effect. Block
grants like those in TANF often cause a slightly unequal distribution
of money because they are based on the number of recipients of aid in
an earlier time period. They also, as I said above, lead to differing
benefits between different states. This is yet another one of the many
problems resulting from the use of states as budgetary units.

A strong federal government is also needed to regulate matters
where some states harm other states or countries, especially
other much larger areas. Many northeastern states support
stronger federal environmental regulations because pollution from
the Midwestern states is carried downwind towards the
northeastern states. These regulations must be imposed at the
federal level because otherwise the Midwestern states would not
impose them. Such regulations are important for people's health
in significant parts of the country and also for the global
environment as a whole. There is no advocate in the federal
system at all for the rest of the world, which is harmed
considerably by the pollution from the United States. However,
it is much better for the federal government to impose
environmental regulations, because a smaller region is less
likely to impose such regulations on itself when the costs are
local and the benefits are global.

For similar reasons, the federal government is much better than the
states at redistributing income, both because
there is considerable inequality between the states, and because
politicians are more likely to restrain from such spending when the
costs are borne locally (because the benefits are also local, this
effect may not be so large in this case). It is clear that trends in
income inequality tends to follow trends in the level of federal
control of government. In the 1930s and 1960s, when the federal
government was gaining considerable power, considerable reductions in
income inequality followed. However, in the 1980s and 1990s, as the
federal government is giving up power to the states, there has been an
increase in income inequality. In order to achieve income
redistribution of a level that maximizes total utility (or even comes
close), it is necessary to have strong federal control of the
budget.

There are some situations in this type of federalism should be
left partially to the states, because local conditions vary
greatly. Education, although it should be funded by the federal
government, should be controlled largely (although not
completely) at the local level, where people understand the
environment in which they must educate. Similarly, in the
development of public transportation, the federal government
should provide large amounts of funding but leave some of the
decision-making as to what type of transportation will be built
to the states or to lower levels of government.

One of the original arguments for the federal system can now be used
to argue against a form of the federal a system biased towards the
states. Madison,
in the The
Federalist, argued that the federal system helps prevent
factions from gaining too much control and causing tyranny of the
majority. States are much more likely to be taken over by these
factions, since they are much smaller and more homogeneous. This
control by special interests occurs frequently and must often be broken
up by the federal government. The best-known example is the racist
policy of Southern states for the century following the Civil War. A
more recent example is the dominance of the pork industry in preventing
environmental regulation in North Carolina. It is much easier for
special interests to dominate in state politics than it is in federal
politics, because many special-interests are related to industries that
cover small parts of the country.

Not only can a strong federal government can accomplish the tasks of
government much better than the states can, but also the arguments that
were once good reasons for state power no longer bear as much weight.
The main one was the preservation of rights as outlined in Madison's
argument for the separation of powers (The
Federalist, No. 51). This
is no longer true for two reasons. The first, as I already said, is
that state governments tend to be more likely to hurt minorities or
listen to special interests. The second is that, after two hundred
years, the government has become considerably more stable and the
people more accustomed to liberty that we need less protection to
preserve our democratic form of government, and we can eliminate the
protection, such as state power, that is the most costly.